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question 28

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Use the information for the question(s) below.
Temporary Housing Services Incorporated (THSI) is considering a project that involves setting up a temporary housing facility in an area recently damaged by a hurricane.THSI will lease space in this facility to various agencies and groups providing relief services to the area.THSI estimates that this project will initially cost $5 million to set up and will generate $20 million in revenues during its first and only year in operation (paid in one year) .Operating expenses are expected to total $12 million during this year and depreciation expense will be another $3 million.THSI will require no working capital for this investment.THSI's marginal tax rate is 35%.
-Assume that THSI's cost of capital for this project is 15%.The net present value (NPV) of this temporary housing project is closest to:

Definitions:

Allocative Efficiency

A state of resource allocation where it is not possible to make someone better off without making someone else worse off.

Productive Efficiency

A situation where an economy or firm produces goods at the lowest possible cost, utilizing all its resources efficiently without waste.

Monopolistic Competition

A market framework where multiple companies distribute products that are akin to each other but not copies, thus granting them a degree of power within the market.

Excess Capacity

A situation where a company or economy can produce more goods or services than currently demanded, often leading to inefficiency and lower prices.